The Academy as a Major Faction idea

Two suggestions.  First one is just, scale it down... make the Academy function somewhat like a minor faction -> akin to Orion from Masters of Orion -> where it has a very strong garrison and can only be 1) conquered or 2) absorbed after completing the academy quest supporting Islander. In fact this would probably be a fun way to increase motivation to complete the quest.

Second suggestion is actually several suggestions to create a complicated rework. Also I'm going to refer to your faction as, The Academics for grammars sake.

The Academics

Population: Academic

Population trait: Gigantic population.

Planet: Terran

Political Ideology; Religious
Suggestion: Scientists

Faction Affinity; Golden Rule. Dust and Influence are the only resources needed. One system faction.
Primary Suggestion: The Academics produce resources normally however, like the United Empire they can make purchases using influence, additionally they start with the :purchase with dust technology.
Edit: The Academics start with the Sophon faction research trait - however it is limited to only the first 10 research projects.

The Academy Faction would be a one system faction and unable to be assimilated by pacific conversion.
Edit: The Academics are unable to produce colonizing ships. They can assimilate minor factions normally. * Does gigantic population override assimiliation or is that ship bound?

The Academy generates dust automatically that increases more and more each turn.
Suggestion: The Academics have as their unique faction tier 3 influence tech, the Riftborn research which has a building with this property. *I think it was the Riftborn. The sweeping changes to the economy will entirely cripple the faction.

The Academy will also have the ability to sell heroes to other factions.
Edit: Whenever a Hero is purchased from the Academy the Academy profits the entire amount.
Edit: The sale of a hero to the Academy does not require the Academy to pay for it immediately or even have the dust on hand, instead the cost is spread out over several turns.

Quests
Suggestion: Completing the first stage of the Academy faction quest is what triggers the galaxy wide Academy quest.
Suggestion: The Academy unique solo quest triggers in part after each stage of The Academy quest is completed.

Heroes
Heroes are made at a faster rate than other factions and military ships can only be bought from the market at a reduced price thanks to Isyanders connections and they can be upgradeable. They will be seen as privateers from get go, to mask the academys involvement.

Suggestion: If you want to you can give the Academics the Vodyani hero trait for xp. Messing with the price of heros is unnecessary. The privateer trait is unneccessary.

Suggestion: Islander's hero ship is upgraded in size according to your largest size ship unlock which helps to mitigate the reduced military strength from limited expansion.

Quests
Suggestion: Completing the first stage of the Academy faction quest is what triggers the galaxy wide Academy quest.
Suggestion: Completing the first stage of the Academy faction quest is what triggers the galaxy wide Academy quest. Players who hate the academy quest may try to blow you up early.

Government
Government; Autocracy. Once the final academy quest is completed, the faction will enter in perpetual anarchy.

Suggestion: Just give the Academy the Federation government. There's no reason to academics wouldn't support multiple political views.